Credit Antitrust Inquiry Broadens

Visa, Mastercared Duality Questioned

March 22, 1997

WASHINGTON - — The Justice Department's antitrust inquiry of Visa U.S.A. and MasterCard International has broadened in recent weeks as investigators question the legality of policies that let banks belong to both major credit-card associations, according to people familiar with the inquiry.

The new government examination revives an old controversy that could shake the structure of the credit-card industry, in which many major banks issue cards under both the Visa and MasterCard names.

"The implications would be far-reaching," said Robert McKinley, president of RAM Research Group, a credit-card industry consulting firm. "If banks had to decide which brand to go with, it could cause vast changes in the market."

Justice Department officials began asking for documents and questioning industry officials more than a month ago about so-called "duality" policies that let banks offer both Visa and MasterCard, people familiar with the investigation say. Details about the widened inquiry were reported in Business Week.

The questions came up as part of a broader inquiry that initially focused on a contrasting concern: different rules that prohibit Visa and MasterCard member banks from offering credit cards for other would-be competitors, such as American Express Co. and Dean Witter Discover & Co.

The latest Justice Department questions grow from the fact that Visa and MasterCard are associations owned by their member banks.

Antitrust investigators are questioning whether incentives for competition between Visa and MasterCard are dampened because many of the same major banks have stakes in both associations, people familiar with the investigation say. If the government decides to challenge the practice, the credit-card groups are likely to fight it out in court, they say.

The Justice Department wouldn't comment, except to say that it is continuing to investigate credit-card membership practices. A Visa spokesman declined comment.

In a statement, MasterCard defended its policies, saying "the current industry structure has given rise to extraordinarily intense competition, and we'd be concerned with any effort to tamper with what has long been recognized as a highly competitive, efficient industry."